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Matthews Asian Growth and Income Fund
MACSX

Snapshot
  • Seeks upside participation while aiming to provide some downside protection in Asia ex Japan
  • Utilize income-paying equities and convertible bonds to help mitigate downside risk and volatility
  • Offers a relatively stable means of participating in Asia’s long-term growth

09/12/1994

Inception Date

2.88%

YTD Return

(as of 03/21/2023)

$12.86

NAV

(as of 03/21/2023)

+0.11

1 Day NAV Change

(as of 03/21/2023)

Objective

Long-term capital appreciation with some current income.

Strategy

Under normal circumstances, the Matthews Asian Growth and Income Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying common stock, preferred stock and other equity securities, and convertible securities as well as fixed-income securities, of any duration or quality, of companies located in Asia. The Fund attempts to offer investors a relatively stable means of participating in a portion of the Asian region’s growth prospects, while providing some downside protection, in comparison to a portfolio that invests purely in common stocks. The strategy of owning convertible bonds and dividend-paying equities is designed to help the Fund to meet its investment objective while helping to reduce the volatility of its portfolio.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 09/12/1994
Fund Assets $601.81 million (02/28/2023)
Currency USD
Ticker MACSX
Cusip 577-130-206
Portfolio Turnover 13.2%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.07%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 02/28/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund - MACSX
09/12/1994
MACSX
-5.58% 2.36% 2.88% -13.33% 1.11% 0.70% 1.88% 7.83%
MSCI All Country Asia ex Japan Index
-6.81% 0.71% 0.85% -14.07% 1.62% -0.61% 3.79% 4.06%
As of 12/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund - MACSX
09/12/1994
MACSX
-0.51% 10.83% -18.43% -18.43% -1.81% -0.23% 1.96% 7.76%
MSCI All Country Asia ex Japan Index
-0.14% 11.43% -19.36% -19.36% -1.15% -0.34% 3.87% 4.05%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews Asian Growth and Income Fund - MACSX
MACSX
-18.43% 0.04% 16.00% 17.26% -10.96% 21.85% 1.34% -4.50% -0.65% 4.83%
MSCI All Country Asia ex Japan Index
-19.36% -4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34%

MSCI AC Asia ex Japan Index since inception value calculated from 8/31/94.

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 12/31/2022)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Yield

(as of 12/31/2022)
2.48% 30-Day SEC Yield
2.48% 30-Day SEC Yield (excluding expense waiver)
3.31% Dividend Yield

Dividend Yield (trailing) Source: FactSet Research Systems, Bloomberg, Matthews
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 48 funds
  • 3 YEAR
  • out of 48 funds
  • 5 YEAR
  • out of 44 funds
  • 10 YEAR
  • out of 32 funds
  • 1 YEAR
  • 2nd
  • 9 out of 32 funds
  • 3 YEAR
  • 3rd
  • 24 out of 31 funds
  • 5 YEAR
  • 3rd
  • 19 out of 29 funds
  • 10 YEAR
  • 4th
  • 16 out of 18 funds
  • SINCE INCEPTION
  • 1st
  • 1 out of 4 funds

Ratings agency calculation methodology

Portfolio Managers

Robert J. Horrocks, PhD photo
Kenneth  Lowe, CFA photo
Kenneth Lowe, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Co-Manager

Siddharth  Bhargava photo
Siddharth Bhargava

Co-Manager

Portfolio Characteristics

(as of 12/31/2022)
Fund Benchmark
Number of Positions 47 1,187
Weighted Average Market Cap $98.1 billion $99.5 billion
Active Share 76.8 n.a.
Price/Cash Flow 10.6 6.8
Price/Book 2.1 1.5
Return On Equity 19.6 14.5
EPS Growth (3 Yr) 13.7% 9.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 12/31/2022)
-0.96%
Alpha
0.89
Beta
77.36%
Upside Capture
88.01%
Downside Capture
-0.13
Sharpe Ratio
-0.13
Information Ratio
5.28%
Tracking Error
93.93

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 02/28/2023)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 7.9
AIA Group, Ltd. Financials China/Hong Kong 4.9
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.3
Samsung Electronics Co., Ltd. Information Technology South Korea 3.6
Housing Development Finance Corp., Ltd. Financials India 3.3
Macquarie Korea Infrastructure Fund Financials South Korea 2.4
HKT Trust & HKT, Ltd. Communication Services China/Hong Kong 2.2
JD.com, Inc. Consumer Discretionary China/Hong Kong 2.2
Pharmaron Beijing Co., Ltd., Cnv., 0.000%, 06/18/2026 Health Care China/Hong Kong 2.1
ESR Group, Ltd., Cnv., 1.500%, 09/30/2025 Real Estate China/Hong Kong 2.1
TOTAL 35.0

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.

Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 12/31/2022)
  • Sector Allocation
  • Country Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 21.1 21.0 0.1
Financials 19.5 21.5 -2.0
Communication Services 12.6 9.9 2.7
Consumer Discretionary 12.4 15.0 -2.6
Industrials 10.0 6.8 3.2
Real Estate 7.3 4.0 3.3
Health Care 6.9 4.1 2.8
Consumer Staples 5.8 5.5 0.3
Utilities 3.2 3.1 0.1
Materials 0.0 5.4 -5.4
Energy 0.0 3.7 -3.7
Cash and Other Assets, Less Liabilities 1.3 0.0 1.3

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Country Fund Benchmark Difference
China/Hong Kong 48.7 44.3 4.4
India 11.3 16.3 -5.0
Taiwan 11.0 15.4 -4.4
South Korea 8.8 12.8 -4.0
Singapore 6.9 3.9 3.0
France 3.4 0.0 3.4
United States 2.0 0.0 2.0
Thailand 1.9 2.5 -0.6
Indonesia 1.8 2.2 -0.4
Philippines 1.5 0.8 0.7
Australia 1.4 0.0 1.4
Malaysia 0.0 1.8 -1.8
Cash and Other Assets, Less Liabilities 1.3 0.0 1.3

Not all countries are included in the benchmark index(es).

Asset Type Fund
Common Equities and ADRs 90.9
Convertible Bonds 7.8
Cash and Other Assets, Less Liabilities 1.3
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 48.1 56.5 -8.4
Large Cap ($10B-$25B) 16.6 22.5 -5.9
Mid Cap ($3B-$10B) 26.8 19.3 7.5
Small Cap (under $3B) 7.2 1.6 5.6
Cash and Other Assets, Less Liabilities 1.3 0.0 1.3

Source: FactSet Research Systems.

Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/13/2022 12/14/2022 $0.13141 $0.00000 $0.41241 $0.54382 4.1% N.A.
06/27/2022 06/28/2022 $0.07829 $0.00000 $0.00000 $0.07829 0.6% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended December 31, 2022

For the year ending December 31, 2022, the Matthews Asian Growth and Income Fund returned -18.43% (Investor Class) and -18.31% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -19.36% over the same period. For the fourth quarter of the year, the Fund returned 10.83% (Investor Class) and 10.89% (Institutional Class), while the benchmark returned 11.43%.

Market environment:

The last quarter of 2022 saw a regional rebound thanks mainly to China exiting its COVID restrictions. But Asian markets grappled with the COVID-related mobility restrictions for most of the year along with rising rates and inflation, geopolitical tensions and a weakening consumer. A cyclical correction in semiconductor inventories added to the headwinds for the technology-dependent markets of South Korea and Taiwan, which both fell over 20% in the year. China’s equity markets, with their own headwinds, fell almost 20%. Mobility restrictions impacted housing sales which, along with prior efforts to reduce leverage among property developers, prompted liquidity concerns for the sector. In Asia generally, higher global interest rates challenged lofty valuations for high-growth internet and electric vehicle (EV) stocks. The region also saw geopolitical tensions impact sentiment, particularly in China as the U.S. placed restrictions on its own exports of key technology to the country.

The second half of the year had more positives. Significant steps were made toward resolving the U.S.-China audit dispute concerning Chinese companies listed in the U.S., China eased up on regulation from online gaming to property development and the Chinese government took concrete steps to re-emerge from the pandemic. Indonesia and Singapore were among the few markets to post positive U.S. dollar-returns for 2022. Indonesia gained from rising commodity prices while Singapore benefited from reopening early in the year. 

Performance Contributors and Detractors:

From a country perspective, the portfolio’s overweight and stock selection in Singapore was the biggest contributor to relative performance. Our overweight and stock selection in China/Hong Kong was also a top contributor. In contrast, our stock selection in India was the biggest detractor to performance.

At the sector level, stock selection in information technology, communication services and financials were the biggest contributors to performance during the year. Financials benefited as businesses exposed to rate rises did well while China’s recovery helped all three sectors. On the other hand, stock selection in consumer staples and consumer discretionary were the biggest detractors.

At the stock level, AIA Group was the top contributor to performance in 2022. Faced with the challenges posed by China’s zero-COVID policy, the company focused on rationalizing costs and also announced its first stock buyback since its initial public offering (IPO) in 2010. With the scrapping of zero COVID, the company’s agency business has recovered to pre-pandemic levels. United Overseas Bank in Singapore also performed well, underpinned by rising interest margins in tandem with U.S. rate hikes. The bank's technology investments reduced costs and there were no major asset quality issues. Yum China Holdings, operator of KFC and Pizza Hut brands in China, was a surprisingly strong performer. Management’s response to zero COVID was to share workers across locations that were open and expand digital sales. The company beat earnings expectations and its earnings multiple remained resilient. In contrast, Tencent Holdings was the biggest detractor as Internet stocks corrected globally as central banks rapidly hiked interest rates. Additional challenges included weak consumer and ad spending and a regulatory stay on game approvals. The start of new approvals and the easing of pandemic restrictions signal better days ahead. Another detractor was Taiwan Semiconductor Manufacturing Co. (TSMC) as demand for PCs and smartphones slowed in 2022. Geopolitical concerns between China, Taiwan and the U.S. also weighed on the stock. Thanks to China’s removal of its COVID policy and with it, improved market sentiment, both Tencent and TSMC were top performers in the fourth quarter. Another large detractor for the full year was CIFI Ever Sunshine Services Group, a property management service provider in Hong Kong. The government crack-down on leverage in the real estate market prompted concerns over the liquidity of developers, including Ever Sunshine’s parent company CIFI Holdings Group.

Notable Portfolio Changes:

The fund exited Topsports International, an athletic footwear and apparel retailer in China serving major global brands. Concerns remain over the long-term bargaining power of retailers as brands seek to go direct to consumers. Another exit in the consumer space was Coway, an appliance renter in South Korea. Slowing consumer demand in a saturated market with rising competition has impacted long-term prospects and the ability to execute meaningful dividend increases. Coway was replaced by SK Telecom. While SK Telecom operates in a low-growth market it offers a healthy yield of over 8% in addition to management’s commitment to sustain dividends going forward.

Outlook:

Following China’s 20th Party Congress in October we have seen a return to more pragmatic policies. The major issues of supporting the property sector through its ongoing liquidity challenges, easing regulatory conflicts, attempting to improve bilateral relations with other countries, and engaging in economic reopening, have all made progress. The most pivotal of these has been the removal of the zero-COVID policy, albeit the transition to normalcy has been challenging as infection rates rise and economic activity is likely to take some time to fully resume. 

Looking ahead, all these issues will likely continue to drive asset values in Asia. Importantly, a low base should allow for a return to double-digit earnings growth for China this year if the renewed policy regime remains in place. While this is a constructive argument for emerging markets, expectations for Asia as a whole are for a more muted 5% growth given a possible recession in the U.S. and a technology cycle that has slowed. Meanwhile, valuations are a reasonable, although not especially cheap, 13x P/E. At a portfolio level, we continue to believe that this backdrop reinforces the importance of investing in quality companies that exhibit visible cash flow generation that is both sustainable and growing. When combined with a healthy income stream, it is our view that this can provide an attractive risk-adjusted return for our shareholders over a cycle.

Top 10 holdings as of December 31, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MACSX as of 12/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-18.43% -1.81% -0.23% 1.96% 7.76% 09/12/1994

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.

Fees & Expenses
Gross Expense Ratio 1.07%
Yields as of 12/31/2022
30-Day SEC Yield 2.48%
30-Day SEC Yield (excluding expense waiver) 2.48%
Dividend Yield 3.31%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 12/31/2022, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.

Dividend Yield (trailing) is the weighted average sum of the dividends paid by each equity security held by the Fund over the last 12 months divided by the current price as of report date. The annualised dividend yield is for the equity-only portion of the Fund and does not reflect the actual yield an investor in the Fund would receive. There can be no guarantee that companies that the Fund invests in, and which have historically paid dividends, will continue to pay them or to pay them at the current rates in the future. A positive distribution yield does not imply positive return, and past yields are no guarantee of future yields.

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect current views. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein. The information does not constitute a recommendation to buy or sell any securities mentioned.